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Monday, June 7, 2010

Knowledge management guru Thomas Davenport discusses the future of knowledge management in the Internet era. The acknowledged dean of knowledge management, Thomas Davenport spends his time teaching individuals and organizations how to maximize their investments in information technology.

The application of knowledge depends on people, not technology, Davenport has explained in books such as Working Knowledge: How Organizations Manage What They Know and Information Ecology: Mastering the Information and Knowledge Environment.

I asked Davenport to expound on his views using an old but reliable knowledge management tool – the telephone. In this interview, he talks about the future of knowledge management within large organizations, and how the Internet is changing the way people share knowledge.

Do you feel the Web has changed the way knowledge management has taken hold in the corporate world?

Certainly it's been a huge factor. I think two technologies have been the primary drivers of the rise of knowledge management. The Web is one of them, and Lotus Notes is the other. A lot of the early adopters used Lotus Notes, but a lot of the more recent adopters are Web-based.

The Web is cheaper and simpler, and hypertext is very well suited for showing linkages between different types of knowledge and ideas. More and more vendors are developing capabilities you can use for knowledge management. I think the Web is now probably equal to, if not surpassing Lotus Notes in functionality.

With the new emphasis on customer relationship management, sales force automation, one-to-one relationships, etc., do you find companies paying attention to customer knowledge in a serious way?

Well, there's a lot of energy around transaction systems involving customers. My only concern is that not much of the transaction data is actually turned into knowledge in most organizations. For example, you have these customer asset management systems that a lot of companies are using, Vantive, Scopus, Clarify, etc.

The primary emphasis of those systems seems to be tracking customer support transactions and trouble tickets, rather than resolving problems or taking the knowledge you get from those systems and passing it along to, say, product developers. There's a lot of potential there, but we need to focus more on the knowledge end, and a little less on the data end.

What do you mean by that?

Well, throughout the brief history of the information age, we've focused very heavily on getting basic transaction systems in place. I suppose you can argue that they're doing that as a prerequisite for analyzing and understanding the data and turning it into knowledge. But the problem is, in many cases, we never get around to turning data into knowledge.

If you spend all your time collecting data, you don't have time left to think?

Exactly. So for example, all these point-of-sales systems involving scanner data – everybody collects scanner data, but very few retail organizations do much with it. In fact, some have started to throw it away, because they figure if they're not going to analyze it, why keep it around? With big enterprise systems like SAP, my research suggests that very few companies have started to change the way they manage with this ERP data; it's all about doing basic business transactions, but nobody is turning the SAP data into SAP knowledge.

Another problem is measurement. How do you quantify whether you're succeeding in your knowledge management effort?

It's a bit hypocritical to measure knowledge management that way. In the U.S. alone, we spend over a trillion dollars a year on information technology, and nobody has ever figured out any good way to measure its impact on productivity. So, I'm not sure its fair [to measure knowledge management that way].

There are ways to measure the impact of knowledge management – not at the level of the organization, but for particular processes and functions. You can certainly measure how many customer support calls per hour you dealt with before [versus] after; how many people you didn't have to hire; how much more quickly the sales force is coming up the learning curve in terms of selling products.

But what we cannot do, and what I think is a pretty bad idea, is to try to create an intellectual capital "balance sheet." I met today with some people from Skandia, who finally agreed with me that you can't really put knowledge on a balance sheet. They've made some interesting efforts to measure intellectual capital; I'm not sure I agree with a lot of the measures they've chosen.

Do you view hiring the right people as a success factor in knowledge management? You have to hire people who are interested in learning, don't you think?

Sometimes I think that intellectual curiosity is genetically determined. I always say, if people don't check out your website before you hire them, chances are not very good they'll check out your knowledge repository after you hire them.

Do you see an increase in the number of companies that reward their employees for sharing knowledge? I was talking to a business development manager who said that it made no difference what database he had, he couldn't get his salespeople to write down anything after they visited the customer.

It's a cultural thing in a lot of organizations. There have been some limited attempts to do that, primarily in consulting firms. For example, they'll do technical things like saying you can't get a project number for a client project unless you describe what the project is, beforehand. Or they give people some sense of how well they share, or create, or use knowledge, when they're evaluated for their performance. But even among companies that are doing it, it's pretty mechanical; it's not clear how serious they are about it.

Do you feel there's a relationship between the end of reengineering and the arrival of ERP? That ERP really provided companies with a reengineering solution, a system they could adapt and reengineer their business around?

There's certainly a relationship. When the need to change the way of doing business didn't go away, and they realized that they needed to put in these systems for Year 2000 purposes anyway, the message was: "Well, this is sort of reengineering in the form of a computer system." They were all quite happy to say, "Fine, I'll pay a few hundred million bucks and get reengineering along with a totally integrated real-time, cross-functional system." So there's definitely a close relationship. SAP and ERP probably helped center the energy around reengineering more quickly than if they hadn't been around.

Do you see any knowledge management systems used in strategy development and strategic decision making?

One of my big complaints about the knowledge management work done thus far is that it's too tactical and too focused on particular functions and processes within an organization – making them more efficient and effective. Very few knowledge management projects are transformational and strategic. I think it would be a good idea to do more of that, but I can't say I've seen too much of it.

I have this article in the July-August issue of the Harvard Business Review about how companies should be thinking about ERP from the standpoint of strategy and organizational change and new people skills that will be required. Some are thinking about it from a process standpoint, but that's about the extent of the business change they address. And even, increasingly, companies are saying, "We'll jam this thing in and make the process changes later."

The weekly trade journals are full of ERP horror stories…

These horror stories involve [ERP] taking a lot longer and costing a lot more to put these things in than people had anticipated. But you're not just putting in a computer system, you're making dramatic changes in how the organization works, and it isn't too surprising that it takes a long time and costs a lot of money to do.

These systems work very well from a technical standpoint, and they're every person's dream. From the beginning of the information age, we wanted these integrated systems all working off a common database that could be used to run the entire company. But now that we have the technical capability, you've got to change the organization to take advantage of it, and that is an extremely difficult thing to do! Plus, you have a lot of managers saying, "Tell me why I should change the way I do business just to suit an information system." So it's very controversial as well.